Summary
Matter much to most mining of iron ore in the world to encourage and facilitate the deployment of steel producers in Brazil creating captive customers for its huge reserve base of iron ore in both the southeast and in northern system of Brazil.
Preferably VALE acts as a minority in the steelworks projects, attracting and facilitating the implementation of steel producers in Brazil.
Analysis
In the specific case of the steel plant in the north, the state of Para, there is allied to the political leverage investments steel for the rich Carajás ore, but also cater to strong political pressure from the local government sustained and supported by federal government of Brazil.
Certainly there are other more interesting projects of steel in the Brazilian territory for Vale but it is difficult to assess whether the mining company that has on its board of directors the pension fund for employees of state-owned Bank of Brazil dominated by representatives of government and BNDES , another bank state of development will be able to resist the pressure to install a project that would not be technically on top of the list of the most economically feasible.
Log in steel business is the ability to develop business metallic Vale position as a supplier of iron units for steel, including promoting the development of technology.
This means constantly seeking valuation and liquidity of the shares steel, using them to promote the development and restructuring of the industry and how to leverage the consumption of products Vale.
Another goal is to reallocate resources efficiently for the development of new initiatives.
It is the principle of "Investment for Trade" where VALE participates as a minority partner
It also discusses projects semifinished products (plates) or metal (pig iron and HBI);
The preferred shareholders for VALE will be consumers of the product (off takers) and / or determined to be operators of plants;
Earnings for the Vale partners , would be the regular supply of iron ore of high quality and mainly logistics gains, when at certain times partners can get for shipping at the same price per ton of ore sold .
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
